Public sector wage bills in Middle East and Central Asia ‘too high’

IMF deputy managing director Tao Zhang has warned that public sector wage bills in the Middle East and Central Asia are far higher than those in similar countries, absorbing money that could be better used.

Launching a in the two regions, Zhang [pictured right] said: “One key finding is that wage bills in the Middle East and Central Asia are high compared to other regions.

“Average wage bills amount to 10% of GDP, compared to 6% in similar countries outside the region. If anything, this highlights the macroeconomic significance of the issue at hand.”

He said this was partly a legacy of state-driven economic models and of governments acting as ‘employer of first resort’.

In oil-exporting countries, governments tried to maintain social cohesion by offering high levels of compensation compared to the private sector.

“Needless to say, this has distorted labour markets and competitiveness,” Zhang said.

“In addition, the political instability and conflict across the region means that security-related employment is on the rise. This can have implications for public wage bills.”

Zhang said reforming public sector wage spends “can be complicated and time consuming” but called on governments to pursue wage policies that were fiscally sustainable and focused on providing effective and equitable public services.

Reducing spend on public sector wages could free up resources for measures that would promote higher and fairer growth.

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